Knowing When and How to Use Your Power of Attorney
If you have been designated as someone’s attorney-in-fact under a power of attorney, it means you have been entrusted to make decisions on their behalf. Having power of attorney is not a responsibility that should be taken lightly, because not only is another person’s life and/or finances in your hands, but a wrong move could give rise to legal retaliation.
- What if the person who granted you medical power of attorney becomes incapacitated as a result of an accident? What kind of approval must you obtain to start acting on their behalf and how do you decide which medical treatments to consent to?
- What if you are the durable power of attorney of someone who appears to be losing competence? Are you entitled to take over control of their life and start acting on their behalf in all matters?
- What if you suspect a person is subject to abuse? As their financial power of attorney, can you file a claim on their behalf against the alleged offender to recover the property and/or assets that were lost?
- What if a family member of the person who granted you power of attorney accuses you of abusing your POA for personal gain and tries to have you removed? What is the best way to defend yourself against wrongful allegations?
Whether you need assistance making difficult decisions or wish to confirm the decisions you are making are the right ones, Keystone’s power of attorney services can provide you with the support you need to ensure you are carrying out your duties diligently and ethically.
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What Is Power of Attorney?
In the forthcoming sections, we will answer the above questions and more, as well as provide a detailed definition of power of attorney.
Power of Attorney Definition
A power of attorney is a legally enforceable document that designates a trusted individual or organization to manage the affairs of the person who enacted the POA.
The person who executes the power of attorney document is referred to as the principal. The person granted power of attorney is referred to as the attorney-in-fact.
Not all attorneys-in-fact designated under a power of attorney are created equal. Some powers of attorney provide broad authority to the attorneys-in-fact, whereas others provide authority only in certain scenarios or for pre-designated periods of time.
POAs may also vary in terms of when they come into effect. Many are active as soon as they’re executed, and others don’t become active until the principal is declared mentally incompetent by their physician.
It is important to note that for a POA to be valid, it must be executed by the principal at a time when they are fully competent. If it is later proven that the principal was incompetent when they executed the POA, the POA could be invalidated by the court.
Why Are POAs Enacted?
Powers of attorney tend to be enacted either for the sake of convenience or as a precautionary measure.
An example of when a POA might be convenient is if the principal has business interests across numerous states. By granting a trusted person power of attorney, the principal could have the POA sign contracts on their behalf when they are unable to be present.
If a principal is planning for their future, they may create a POA as a precautionary measure for if and when they become incapacitated. A POA may enable the attorney-in-fact, typically a trusted friend or family member, to make important personal and financial decisions for the principal when the principal is no longer mentally fit to make those decisions for themselves.
Having a POA in place can sometimes help eliminate the delays and tension brought on by family disagreements relating to decisions about their incapacitated loved one.
Medical Power of Attorney vs. Financial Power of Attorney
A medical power of attorney grants the attorney-in-fact the authority to make most health care decisions on behalf of the principal after the principal has been declared incompetent by their physicians. A financial power of attorney grants the attorney-in-fact the authority to make financial and legal decisions for the principal either after the document has been signed or if and when the principal becomes incapacitated.
Some common reasons for why powers of attorney are enacted include:
- Managing real estate
- Managing health care decisions in the event of incapacitation
- Managing bank, investment and retirement accounts
- Operating a business
- Settling claims
- Making financial decisions
Power of Attorney vs. Conservator
If you have any familiarity with conservatorships, you’re likely wondering: What is the difference between an attorney-in-fact and a conservator?
There is one particularly important distinction to keep in mind: a power of attorney must be enacted at a time when the principal is fully competent, whereas a conservator is appointed by the court to manage a person’s personal affairs and/or finances after they have become incapacitated and are unable to care for themselves.
If a person becomes incapacitated without having appointed a power of attorney, they might have no choice but to have a conservator of the person and/or a conservator of the estate appointed to them to manage their personal and/or financial affairs. Conversely, the creation of a POA prior to the principal’s incapacity may avoid the need for the appointment of a conservator in the future.
Which Takes Precedence: A Power of Attorney or Conservatorship?
When a principal has designated an attorney-in-fact to manage their personal, medical, and financial decisions, there might not be a need for a conservator to be appointed if the principal becomes incapacitated. Where a valid POA is in place, the designated attorney-in-fact typically has the authority to act immediately.
Because conservatorships require court supervision, they can become burdensome for the court. In most instances, the court will be inclined not to grant one if existing POA documents can adequately protect the principal’s personal and financial interests.
Under certain circumstances, however, it may be appropriate for the court to appoint a conservator of the person, conservator of the estate or both, even though the principal has existing POA documents in effect.
- If there are gaps in coverage provided by the POA (e.g., if the attorney-in-fact is authorized to manage the principal’s financial affairs but not their personal affairs or vice versa), the court may appoint a conservator to manage the principal’s person or estate.
- If it becomes apparent to the court that elder financial abuse is taking place or if the court believes the attorney-in-fact to not be carrying out their duties properly, it may appoint a conservator, suspending the authority of the attorney-in-fact to act on behalf of the principal.
Power of Attorney vs. Trustee
The roles of an attorney-in-fact and a trustee are separate and distinct. Trustees are charged with overseeing and managing the assets of a trust and typically do not have the authority to make personal decisions on behalf of the person who created the trust, called the settlor. Attorneys-in-fact, on the other hand, are charged with managing all or specified aspects of a principal’s personal life and medical decisions, and/or managing assets the principal owns outside of a trust.
Attorneys-in-fact may have standing to bring an action against a principal’s trust, if, for instance, they suspect the trustee to have misappropriated assets belonging to the principal. However, attorneys-in-fact do not have the authority to bring a trust dispute on behalf of the trust, since the trust is its own entity and POAs have no control over it.
Is It Possible for a Power of Attorney to Have Authority over a Trust?
Generally, an attorney-in-fact under power of attorney has no authority over a trust, and a trustee has no authority over assets outside the trust.
That being said, it is not uncommon for a principal to designate their attorney-in-fact to be the trustee of their trust, or for the settlor to designate the trustee of their trust as their power of attorney, since both POAs and trustees are in positions of confidence.
Power of Attorney Durations
What Is Nondurable Power of Attorney?
A nondurable power of attorney takes effect immediately and ends at a specific time or if and when the principal becomes incapacitated.
What Is Durable Power of Attorney?
A durable power of attorney remains in effect even if the principal eventually becomes incapacitated, and until the principal dies or revokes the document.
What Is Springing Power of Attorney?
A springing power of attorney becomes effective after it is confirmed by a physician or another licensed medical professional that the principal is incapacitated and unable to make decisions for themselves.
Principals often opt for durable powers of attorney since these types of power of attorney can prevent delays in decision-making if the principal becomes incapacitated in the future.
While a springing power of attorney may seem more desirable on the surface, it can cause delays when a speedy decision needs to be made regarding the principal’s health care and/or finances. The attorney-in-fact will have to seek written confirmation of the principal’s incapacitation from their doctor or another medical practitioner prior to making any decisions on the principal’s behalf. This could take days or even weeks.
Types of Power of Attorney
There are different types of powers of attorney available to meet different needs, and they are categorized by function. What your job will entail as the principal’s attorney-in-fact will be determined by the specific type of POA the principal has, as well as the specific terms of the POA document.
The types of powers of attorney available can be broken down into the following four categories.
Limited Power of Attorney
A limited power of attorney is also referred to as a specific power of attorney and provides narrow authority to the attorney-in-fact to act in certain situations, e.g., to make a single real estate transaction or to be effective only for the few months a principal is traveling abroad.
General Power of Attorney
General power of attorney is also referred to as financial power of attorney and provides broad authority to the attorney-in-fact to manage the financial and legal affairs of the principal. In general, the only decisions a financial power of attorney is not permitted to make on behalf of the principal are health care decisions. In many states, financial powers of attorney are durable by default (i.e., they remain in effect even if the principal later becomes incapacitated).
Health Care Power of Attorney
A health care power of attorney is also referred to as a medical power of attorney. A medical power of attorney entitles the attorney-in-fact to make health care decisions for the principal if the principal becomes incapable of making such decisions themselves due to incapacitation. By nature, a medical power of attorney is both springing and durable.
Advance Health Care Directive
An advance health care directive (AHCD) provides the best of both worlds in that it allows a person to both appoint a medical power of attorney and provide instructions for health care (e.g., whether they want life support measures, whether they wish to receive palliative care or comfort care, whether they wish to be resuscitated) should they ever become incapacitated.
If you have been designated as one or more of the aforementioned POAs and are unclear about your role, you should not wait to get in touch with an experienced power of attorney lawyer who can provide you with the clarification you need to fulfill your duties competently.
The Dos and Don’ts of Being a Power of Attorney
As mentioned earlier, not all POAs are made equal. It is important to familiarize yourself with the POA document at hand before making any irreversible decisions. By doing this, you will safeguard yourself from having any claims brought against you for abusing your POA.
What You Should Be Doing as a POA
- Thoroughly examine the financial power of attorney document with help from a POA lawyer.
- Understand the principal’s true intent, and if they are still competent, speak to them about it.
- Take an inventory of the principal’s assets and their worth before making any financial transactions.
- Document every financial decision you make on behalf of the principal and your reasoning behind it.
- Document the hours you worked as a POA and how much you were compensated.
- Before making sweeping decisions, run them by the principal (if the principal is competent) or a power of attorney lawyer (if the principal is incompetent).
- Before doing anything, obtain documentation from the principal’s physician confirming that the principal is incapacitated.
- Before consenting to medical procedures with significant risks, obtain documentation from the principal’s physician that supports your decision.
- Run decisions with sweeping consequences by a power of attorney lawyer before making them.
- Keep records of everything from the principal’s doctor’s visits and diagnoses to prescriptions.
The Limitations of Being a POA
- Altering the principal’s estate planning documents
- Not acting in the principal’s best interest
- Using the principal’s finances for personal gain
- Using your authority as POA to make post-death decisions for the principal
- Appointing someone else to take over as POA
- Consenting to psychosurgery
- Consenting to an abortion
- Consenting to convulsive treatment
- Committing the principal to a mental institution
- Failing to provide comfort care if it’s needed
Power of attorney abuse is a real problem. Many POAs take advantage of the authority they have been trusted with, which can have dire consequences for both the principal and POA if the principal or a family member of the principal decides to bring legal action against the POA. At the end of the day, you must remember that as someone’s power of attorney, you owe fiduciary duties to the principal, or, in other words, you must always act in their best interest.
Not all powers of attorney who have been accused of abuse intended to hurt the principal or their finances. Sometimes, they were making a decision they thought was right, but it turned out to be wrong. A surefire way to ensure you make the right decision every time is to hire a power of attorney lawyer to provide support along the way.
Can a Power of Attorney Receive Compensation for the Time They Spend Carrying Out Their Duties?
Attorneys-in-fact are usually entitled to a “reasonable compensation” for the time and effort they dedicate to carrying out their duties to the principal. The phrase “reasonable compensation,” however, is subjective, so how much a POA gets paid will depend on the compensation terms set forth by the POA document, if such terms exist. If the POA document expressly forbids the power of attorney from collecting compensation, it’s unlikely the POA will be able to collect one.
If the POA is entitled to a compensation, how much they can make will depend on who the power of attorney is. If it is a private professional fiduciary, they may require a more substantial compensation than if the power of attorney were an adult child of the principal.
Can a Power of Attorney Sell Property?
Whether a power of attorney is permitted to sell property depends on three factors: 1) which state the power of attorney was enacted in, 2) what kind of property the POA is trying to sell (i.e., personal or real) and 3) the type of power of attorney that has been enacted.
Because of the complex nature of selling certain property under a POA and because laws vary by state, it is crucial to consult with a power of attorney lawyer to determine whether selling property is something you are permitted to do as a POA and whether the sale is wise and in the best interest of the principal.
Can You Reject a Power of Attorney Designation Even If You Initially Accepted?
Being someone’s attorney-in-fact is a huge job, and you cannot afford to evade any of your responsibilities since someone’s livelihood and life may be at stake. Perhaps you have young children and a demanding job, among a multitude of other duties, and being an attorney-in-fact is not a role you want to take on.
The good news is that, in California, you are generally not obligated to exercise the authority that has been granted to you via a POA document unless: (a) you have already entered into a transaction as attorney-in-fact for the principal, in which case you are obligated to complete the transaction, or (b) you have already expressly agreed in writing to act on behalf of the principal as an attorney-in-fact. Unless these limited exceptions apply, you can decline to act as an attorney-in-fact.
If a POA declines to act after the principal has become incapacitated and therefore cannot legally execute a new POA, and no alternate POAs agree to serve as attorney-in-fact, the only option may be to obtain a conservatorship for the principal. A conservator can be appointed by a loved one of the principal to manage their person and/or finances.
How Keystone’s Power of Attorney Services Can Benefit You
While a power of attorney’s responsibilities may not be as extensive as, say, a conservator’s, trustee’s or executor’s, there nevertheless exists ample room for missteps. Without properly understanding your rights and limitations as someone’s power of attorney, you are setting yourself up not just for failure, but for possible legal retaliation as well.
Keystone’s power of attorney lawyers are some of the best. With them in your corner, you can rest assured all the decisions you make on behalf of the principal will be sound, legal and ethical. Keystone’s power of attorney services serve as an excellent resource for attorneys-in-fact, regardless of the type of power of attorney they are.
Has Someone Designated You as Their Power of Attorney?
If someone has appointed you to be their POA, you are probably wondering: Where do I begin? The first step is almost always parsing the POA document.
The thought of combing through a bunch of legalese can be anxiety-inducing, but this is where Keystone’s power of attorney lawyers come in. They can help you understand the terms of the POA and provide clarification about everything, from when the document will become effective (if it is not already) to what sorts of tasks will be your responsibility.
Keystone offers comprehensive power of attorney services that include:
- Counseling for POAs
- Interpreting the POA document
- Obtaining any necessary documentation needed for POAs to act on behalf of the principal
- Preparing necessary accountings
What Is the Role of a Power of Attorney in a Legal Dispute?
Since POAs are fiduciaries, they must always act in the best interest of the principal. What does this mean in terms of legal disputes? Unfortunately, there is no hard and fast rule that dictates whether or not a POA should bring a dispute or participate in one. It really depends on the type of power of attorney that is in place, the nature of the dispute at hand, and whether the principal is incapacitated.
A power of attorney lawyer can help determine whether it is in the POA’s best interest to get involved in a legal dispute involving the principal.
- If litigation is brought against an incapacitated principal (e.g., a third party is making an illegitimate financial claim on the principal’s property)
- If litigation needs to be brought on behalf of the principal (e.g., if it is suspected a family member or third party is abusing the incapacitated principal)
- If the principal’s original wishes need to be defended against family members who are trying to derail them
What If an Attorney-in-Fact Is Accused of Power of Attorney Abuse?
When POAs are managing the life and/or finances of an incapacitated principal, family members of the principal may bring claims of POA abuse if they disagree with the POA’s decisions or with the POA designation in general.
All this to say that just because a POA has been accused of abuse doesn’t mean that the POA necessarily did something wrong. Many times, the decisions a POA is forced to make are subjective with no right or wrong answer, but there are also times where POAs do act improperly and have legitimately committed negligence or abuse.
Whether you are a power of attorney who is being accused of POA abuse or suspect that another one of the principal’s POAs has committed abuse against the principal, your best route of action is getting in touch with a power of attorney lawyer right away. The sooner you act, the better. Keystone’s power of attorney lawyers will help you secure the best outcome possible for your case.
- Breach of fiduciary duty (e.g., transferring the principal’s property without their consent)
- Medical abuse (e.g., withholding medication or treatment, consenting to risky treatments)
- Financial abuse (e.g., misappropriating funds from the principal for personal gain)
- Fraud (e.g., opening and using credit card accounts in the principal’s name)
Is a POA Responsible for Providing Accountings?
Financial powers of attorney or limited powers of attorney tasked with making transactions that are financial in nature are required to keep thorough accountings of every financial action they take on behalf of the principal. While a medical power of attorney is required to keep thorough records of the health care decisions they make for the principal, the accounting requirement applies primarily to financial powers of attorney or certain limited powers of attorney.
Thorough accountings must be kept not only because they are a legal requirement, but because they can help protect the POA should they ever be accused of mismanaging the principal’s assets. Attorneys-in-fact should try to be as detailed as possible when keeping records.
Some of the information that should be included in POA accountings includes:
- The principal’s assets and liabilities on the date the attorney-in-fact began acting under the POA document
- Every business transaction made on behalf of the principal and the reasoning behind each
- Every asset that is acquired or disposed of on behalf of the principal
- Money spent and received on behalf of the principal
- Investments made on behalf of the principal
- Liabilities incurred or discharged
- Compensation received
Inaccurate accountings can result in legal disputes, so it is best for anyone appointed as an attorney-in-fact under a POA to seek help from a power of attorney lawyer to check accountings, prepare them on their behalf or defend them if they are ever challenged.
Can a POA Be Suspended or Removed?
If a POA is suspected of committing abuse against a principal or negligently managing the principal’s person or finances, they are subject to suspension and/or removal by the court.
If a family member of an incapacitated principal suspects a power of attorney of having engaged in misconduct, they may try to have the POA removed and potentially surcharged, depending on the gravity of the alleged misconduct.
A power of attorney lawyer can help you navigate such a scenario to maintain your POA status if that is your desire and/or prevent you from incurring a surcharge. Likewise, if you are a family member of the principal who believes that a designated attorney-in-fact has acted improperly, a power of attorney lawyer can help you take action to see that the attorney-in-fact is suspended and/or removed.
If the principal is not incapacitated, they can revoke a POA at any time, and if they suspect you of misconduct, they, too, can bring a claim against you in court to recover damages.
Contact Us
Call Keystone Today to Learn More About Its Power of Attorney Services!
Be the best power of attorney you can be by hiring Keystone’s experienced power of attorney lawyers to help you navigate every decision you have to make on behalf of the principal, as well as any other POA-related issues that arise. You have been entrusted with control over someone’s life and/or finances, so it is crucial to understand your duties and take them seriously.
Request a free consultation with our POA lawyers today to learn how our power of attorney services can benefit you!
